Delay prompts First Gen to scrap Avion contract

MANILA, Philippines – Lopez-owned First Gen Corp. has scrapped the contract with its Slovakian contractor over the delay in completing its 97-megawatt (MW) Avion open cycle natural gas-fired power plant in Batangas.

In a disclosure to the Philippine Stock Exchange yesterday, First Gen said its wholly owned subsidiary Prime Meridian Powergen Corp. (PMPC) terminated its turnkey engineering, procurement and construction contracts with Istroenergo Group a.s. (IEG) and its local unit Energy Project Completion Ltd. (EPC).

“The contracts were terminated by PMPC due to IEG/EPC’s failure to comply with their obligations under the contracts, including, but not limited to, delay in completing the works,” the company said.

IEG is an engineering contractor from Slovakia experienced in the construction of aeroderivative gas turbine power plants.

It was tapped by PMPC in August 2014 to construct and commission the Avion plant, which features aeroderivative gas turbines that have the capability to run on natural gas or liquid fuel.

First Gen said PMPC has drawn against various performance securities issued by IEG and EPC in the amount of $12.2 million and P146.8 million partly to complete the outstanding works required to commission the plant.

The power plant was targeted for completion in time for summer 2015.

In September last year, First Gen president and COO Francis Giles Puno said the completion target was moved to end-2015 due to “delays on site preparation.”

With its deal with IEG terminated, First Gen said its Avion plant “will undergo further optimization and testing before” in the coming weeks prior to the start of commercial operation.

“Following the termination, PMPC is now able to focus on completing the commissioning of Avion plant and will work directly with suitably qualified contractors as needed,” it said.